Magazine

Table: The Money Machine


Microsoft (MSFT) is building on top of its huge and profitable franchises for desktop and server software by forging into such markets as game consoles, small-business software, and Web services. Its goal: To return to 20% revenue growth, up from 14% today.

THE CASH GENERATORS:

WINDOWS

Windows XP, the biggest update in five years, is set for Oct. 25. This version has a sleek look, is less crash-prone, and works better with the Web. The computer industry hopes the software, which has 97% of the market, could spark a PC buying wave. That could be tough in a saturated market and a slowing economy.

BUSINESS SERVERS

Microsoft is busting out of the low end of the server market with its powerful Windows 2000, which began shipping last year. Servers running Win2000 claimed 41% of the market last year, up from 38% in 1999, says market researcher IDC.

OFFICE

The applications suite, which has more than 90% of the market, gets a face-lift on May 31 with Office XP. It's easier to use and is better linked to the Web. With companies pinching pennies, it may not catch on until Windows XP ships. That's because the new applications will work best on the new operating system.

MSN

MSN is now one of the most trafficked sites on the Web. The msn.com portal ranks second in the U.S., behind Yahoo! (YHOO) Hotmail is the world's most used free e-mail service. And MSN Internet Access trails only America Online (AOL) as the most popular way for consumers to hop onto the Web.

POCKET PC

After years of false starts, the newest version of its tiny operating software for handheld devices is starting to eat into rival Palm's (PALM) share. IDC says PocketPC should grab 19% of the handheld market by yearend, up from 10% two years ago. By 2004, that number could climb to 36%.

THE NEW BETS:

.NET SERVICES

This technology lets unrelated Web sites talk with one another and with PC programs. One click can trigger a cascade of actions without the user having to open new programs or visit new Web sites. Microsoft hopes to use .Net to create Web services. First up: an alert service due next year.

XBOX

Microsoft's leap into the $20 billion game-console business begins on Nov. 8 with Xbox. Its game box will be three times more powerful than rival consoles by Sony (SNE) and Nintendo (NTDOY). Microsoft plans to spend $500 million in the first 18 months on advertising alone. But it may not be able to match rivals' game offerings.

SMALL BUSINESS

This year, Microsoft will enter the $19 billion small-business software arena. It bought accounting software specialist Great Plains Software (GPSI) for $1.1 billion in April. And it plans to offer customer-relationship, human-resources, and supply-chain software.

STINGER

This is the latest iteration of Microsoft's software for cell phones. Stinger trials begin later this year with Vodafone (VOD) in Britain, Telefonica (TEF)in Spain, and T-Mobile in Germany. It's no slam dunk, with phonemakers Nokia (NOK), Ericsson (ERICY), and Motorola (MOT) backing rival Symbian.

ULTIMATE TV

Launched this spring, it's a set-top box on steroids. The $399 device not only lets people surf the Web and interact with TV shows but also record multiple programs on a hard drive for later viewing.


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